AT&T Still Optimistic as Video Subs Fall
AT&T lost 54,000 domestic video subscribers last quarter, unable to overcome U-verse customer losses despite DirecTV subscriber gains. However, because of the acquisition of DirecTV last summer, AT&T ended the first three months of the year with a whopping 25.3 million video customers and $8.9 billion in consumer video revenue, well ahead of its numbers a year ago.
Those results mean AT&T Inc. (NYSE: T) still easily surpasses the second-biggest pay-TV company in the US. As of last quarter, rival Comcast Corp. (Nasdaq: CMCSA, CMCSK) had 22.4 million video subscribers. The cable company will report updated numbers on Wednesday.
Although AT&T's first-quarter video results were relatively weak, CFO John Stephens is still bullish on pulling out a net-positive video subscriber number by the end of the year. Citing the positive effects of AT&T's NFL content rights, which should help the company score points with audiences in the fall, and the ability to introduce new products and expand bundling efforts, Stephens says he believes AT&T is still on target for full-year growth.
Equally important, Stephens notes that AT&T stands to gain even greater efficiencies in the second half of 2016 resulting from the continued benefits of the company's acquisition of DirecTV.
"In the second half of the year we'll have had the integration efforts really completed and fully ramped," said Stephens on AT&T's earnings call, pointing out that truck rolls will continue to decrease, and the telco will continue to optimize its sales process.
AT&T is also benefiting from lower per-subscriber content costs, thanks to its increased customer base and the more favorable terms already in place through existing DirecTV licensing contracts. DirecTV was able to negotiate lower content costs than AT&T could with U-verse because the satellite company served a much large viewing audience even as a standalone entity.
Not included in AT&T's projections so far are the telco's over-the-top video efforts. AT&T is an investor in Fullscreen Media, which launched a subscription OTT video service this week. The telecom operator has also announced that it will launch three new OTT services under the DirecTV brand later this year. They include a multiscreen version of the DirecTV home product called DirecTV Now, a DirecTV Mobile service built specifically for mobile viewers, and a free ad-supported service called DirecTV Preview. (See AT&T Cuts the Cord, Reveals OTT Video Plans.)
On the consumer broadband front, AT&T's first quarter produced a decidedly lackluster subscriber count. Although the company added 5,000 total US customers for the quarter, DSL subscriber numbers continued to plummet, leaving the telco with fewer broadband customers in the first quarter of 2016 than in the first quarter of 2015. The total number of domestic subscribers in Q1 was 14.3 million compared to 14.5 million a year ago.
In contrast, consumer broadband revenue was up substantially year-on-year. AT&T ended the first quarter with $1.8 million in revenue from consumer broadband services versus $1.6 million at the end of Q1 2015.
The higher revenue numbers likely come from sales of higher-speed broadband subscriptions. Stephens said on the earnings call that AT&T has about 1.6 million GigaPower (fiber-to-the-home) locations active today.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading